Here I go with another prediction. The free trade era may be nearing its end. If so, it may be the United States that acts first to kill it off.
Consider this. When Mulroney and Reagan got into this business, global conditions were considerably different than they are today. Fuel was in abundant supply and relatively affordable, at least in the West. China and India were backward societies that posed no great rivalry industrially or in the clamour for resources. The wealth from the West's economic prowess was heavily retained in the West. With all these advantages, free trade offered great promise.
How things have changed. Fuel and other resources are now becoming shorter in supply and much more expensive. China and India are emerging from their agrarian past and into their own industrial revolutions. In the process they're absorbing much of the West's (or at least America's) wealth. China is on the verge of ousting the United States as the world's largest economy and it already holds a trillion US dollars in its foreign reserves.
The global marketplace is now beset with serious security issues such as fundamentalism, terrorism and climate change; and economic interdependence is yielding very real strategic vulnerabilities. Free trade as it's modelled isn't designed to adapt to these rapid changes.
The question becomes whether America can afford to continue pumping its wealth into Asia? There are already a lot of Americans unhappy that everything on the toy store shelves is made in China. What will they think when Chinese cars begin appearing in numbers on their streets?
To my simple mind, free trade was a concept built on a number of underlying assumptions that no longer hold true. I think the draw of protectionism will soon become irresistible on Capitol Hill.
3 comments:
To my simple mind, free trade was a concept built on a number of underlying assumptions that no longer hold true.
Why? Have they revoked the laws of economics?
If the science of economics has one grand result, it is that free trade is generally a very good thing, capable of increasing the wealth of all nations.
The world needs more trade, not less. To restrict trade now could instigate a disaster on a global scale. That a Canadian would suggest restricting trade is insane, as our wealth depends critically on open borders.
Actually, Bunny, the whole "science" of economics is coming under intense scrutiny. It's a very narrowly structured model that's built on assumptions that are becoming increasingly difficult to keep relevant. For example, classical economics has little capacity to reflect social and environmental costs in its models, so the tendancy is to simply ignore such things.
You should note that I speculated the end of free trade will come from the more powerful and yet more vulnerable economy of the United States. Canada, as a resource nation with a positive balance of trade, a stable currency and developing markets beyond North America, will be in a significantly different position.
As for insanity you can find as much of that as you want in the dot com and subprime lending fiascos. Insanity happens, bunny, - a lot.
Enna Say:....Finally....someone with the nerve to say....Free trade won't last and it will be the States that rigs its dimise....hear..hear!!
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